February 23, 2009

White House Addresses Bank Nationalization Speculation

Amid continuing speculation on Wall Street that Bank of America and Citigroup could be nationalized, the White House stressed February 20 that it continues to strongly support a private banking system. Federal Reserve Board Chairman Ben Bernanke gave similar assurances earlier in the week.

White House press secretary Robert Gibbs told reporters that the administration “continues to strongly believe that a privately-held banking system is the correct way to go, ensuring that they are regulated sufficiently by this government. That’s been our belief for quite some time and we continue to have that.”

Pressed further as to whether the White House would not rule out nationalizing the banks, Gibbs responded, “let me be clear. The president believes…a privately held banking system regulated by the government is what this country should have.”

Meanwhile, American Banking Association President Edward Yingling said continued speculation of increased government involvement in the banking sector is inhibiting private capital investment and eroding consumer confidence. “We believe that the whole discussion about nationalization is impairing the financial sector and making the credit situation worse,” Yingling said.

He noted that private capital investment will not return “until the fear of further dilution of private equity investments in the banking system has significantly abated…nationalization, however defined, is not the solution to the problems in the financial markets.”